Anxiety occurs commonly in people with dementia, with significant impact on life function and healthcare, but virtually nothing is known about effective treatment strategies. Given limitations of pharmacological treatment for anxiety in this population and some evidence that cognitive behavior therapy (CBT) may be of value, we propose to develop, refine, and pilot test a manual for CBT of anxiety in dementia (CBT-AD). No such treatment yet has been developed or tested. CBT-AD will integrate empirically supported interventions for late-life anxiety with strategies that facilitate comprehension, encoding, and retrieval for people with dementia (e.g., memory cueing, spaced retrieval). Collaterals (defined as a family member, friend, or caregiver who spends at least 8 hours a week with the patient) will participate in assessment and treatment. Three phases of work will be needed. In Phase I (6 months), we will draft the CBT-AD manual and an associated measure of therapist adherence and competence, obtain input from a panel of experts and modify the manual and treatment integrity measure, train independent evaluators, and continue to refine therapist skills. In Phase II (8 months), we will conduct an open clinical trial of CBT-AD with 10 patients who have significant anxiety and mild to moderate dementia associated with a diagnosis of Alzheimer's disease. The CBT-AD manual will be revised based on input from patients, collaterals, therapists, investigators, and the expert panel. Fourteen patients will be recruited to allow for up to 30% attrition. In Phase III (22 months), we will conduct a small randomized controlled trial of CBT-AD (n = 20) versus enhanced usual care (EUC;n = 20) to estimate effect sizes for a subsequent R01 application. A total of 52 patients with anxiety and dementia (as defined in Phase II) will be recruited to allow for up to 30% attrition. Outcomes will address anxiety severity, coexistent symptoms, quality of life, service utilization, collateral burden, and treatment satisfaction. Outcome assessments will be conducted at baseline, 3-, and 6-months. If the data suggest positive outcomes, the next step will be a large, randomized controlled trial to examine more fully the effects of CBT-AD. The proposed study has significant potential public health benefits for a large subgroup of underserved older patients for whom evidence-based health care options do not yet exist. The project also has potentially important mental health policy implications if CBT-AD produces positive health care outcomes.